Friday, January 28, 2011

Indian Plastics & Polymers Market Outlook

The Indian plastic industry is characterized by the presence of a large number of players in end use applications consisting of over 26,000 small, mid-sized, and large manufactures or fabricators along with 16 major raw material producers. As plastics consumption grew exponentially in 2010 with the total consumption of 8.8 million metric ton (MMT). The current growth rate in Indian polymer industry is 14.6 per cent as compared to 2009 (12.4 per cent). The market is driven by the tremendous growth in packaging, building & construction, consumer goods, and automotive industry. The per capita plastics consumption reached 7.4 kg in 2010 from 4.6 kg in 2005.  Due to widely fragmented market, supplier power is low in Indian plastics industry because of the presence of many suppliers relative to the overall size of the industry segment that leads to high levels of competition tend to keep average profit margins at a modest single digit level except for those firms that specialized in custom products.
Commodity polymers, including polyethylene (PE), polypropylene (PP) and polyvinyl chloride (PVC) enjoy 85 per cent market share of total Indian polymer market, thanks to their low cost, high performance, industries acceptability, and easy formability. Polyolefins (PP & PE) account for about 61 per cent of the total plastics consumption, followed by PVC at around 24 per cent and others by 15 per cent like engineering plastics, speciality plastics, and thermoset. In 2010, among the commodity polymers, low density polyethylene (LDPE) has shown the strongest growth rate of 18 per cent, followed by polyvinyl chloride (PVC) 17 per cent, polypropylene (PP) 15 per cent, and high density polyethylene (HDPE) & linear low density polyethylene (LLDPE) both 14 per cent.
The highest growth rate for LDPE consumption can be attributed to the steadily increasing demand in packaging film, plasticluture, and plus favourable price differential with linear-low density polyethylene (LLDPE). While PVC healthy growth is mainly driven by demand from the building and construction including infrastructure, wire & cables, and footwear sectors. PVC is widely used for applications like pipes & fittings, windows & doors, wires & cables, films & sheets, profiles, footwear, medical tubing and pouches, and floor tiles. The demand is expected to grow during the next five years with growth in building & construction, and infrastructure expected to rise in coming years. Polypropylene (PP) import has been reduced from 2005 to 2010 due to increased domestic production capacity of PP while polyethylene (PE) import is still in the bombilation mood as well as Indian plastics converters are heavily depending on polyvinyl chloride (PVC) imports.
The Indian plastics market is characterized by regional players and also large number of local suppliers. There is also a sort of polarization between small, medium, and big sized companies as large organisation is in highly specialized end-use products while the smaller ones is in the commodity products. As much as 75 per cent of the market is in the unorganized sector and is highly competitive. There are some excellent polymer producers in India having sophisticated and modern automated plant. A good amount is also exported outside. However, there is absence of sufficient supply of speciality polymer and it is imported. Among the Indian polymer suppliers, Reliance Industries Ltd (RIL) has largest market share of more than 70 per cent.

The consumption of plastics will increase about 2.5 fold from 2010 to 2016. The commodity polymers will have the largest share at 88 per cent while polyolefins will remain at about 61 per cent market share of total Indian plastics consumption. In India, extrusion-based methods account for 62 per cent of the total amount of plastics processed, followed by the injection molding at 27 per cent. For the plastics business perspective Gujarat and Maharashtra appear attractive based on availability of raw materials, conducive environment, and policy support for investments.

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